BRANIFF, IN FINANCIAL CRISIS, CANCELS ALL FLIGHTS

TimesMachine is an exclusive benefit for home delivery and digital subscribers.

About the Archive

This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996. To preserve these articles as they originally appeared, The Times does not alter, edit or update them.

Occasionally the digitization process introduces transcription errors or other problems. Please send reports of such problems to archive_feedback@nytimes.com.

Braniff International Airways announced yesterday the suspension of all its domestic and foreign flights, and it urged the thousands of passengers holding Braniff reservations to make other arrangements.

In what was widely interpreted as a prelude to a declaration of bankruptcy, the airline said none of its 9,500 employees should report to work today unless notified specifically to do so.

Braniff ''will have additional public information to provide to its customers and employees tomorrow,'' the airline said in a twoparagraph statement issued from its headquarters in Dallas.

Sam Coats, a Braniff vice president, said in a telephone interview last night after a two-hour board meeting that he could not ''comment one way or the other'' on whether Braniff would file for bankruptcy today. He said the airline would have an announcement early today.

Passengers holding Braniff tickets will be able to fly on other airlilnes, although on a standby basis. Braniff, among the nation's top 10 trunk carriers, would be the first major domestic airline to fail. Its troubles stem from the recession, intense fare-cutting and, above all, a strategy of rapid expansion in an attempt to take advantage of the new freedom made possible by deregulation of the airline industry in 1978.

Other major airlines have had difficulties, but have been absorbed by other carriers in mergers. The most noted cases were United Airlines' takeover of Capital Airlines in the early 1960's and Delta's takeover of Northeast in the 1970's.

In Braniff's case, some analysts said that after the suspension of service ordered for today, the airline would have little choice but to file for some form of protection under the bankruptcy laws. The laws would permit the carrier to delay debt repayments while its affairs were being put in order.

For months Braniff has been trying to renegotiate its debt of $733.2 million with 39 private lenders, which had forgiven payment of interest and principal until next October.

Michael Derchin, airline analyst for the First Boston Corporation, said in a telephone interview that it would be ''almost impossible'' for Braniff to start up again from a complete shut-down of flight operations.

Mr. Coats declined to say what had prompted Braniff to suspend flights. Sources close to Braniff pilots said the company had issued an internal memorandum Tuesday night saying it might have to suspend its Latin American operations. The sources said there was no mention of suspending the airline's entire operation. They noted, however, that Braniff was scheduled to pay salaries today, and said the suspension might have resulted from a cash shortage.

Late yesterday, most of Braniff's fleet of about 71 planes was en route back to the Dallas-Fort Worth Airport, the hub of its operations, where there was confusion among ticket holders who had shown up for Braniff flights. Many sought seats on other carriers.

Tom Myers, a spokesman for Eastern Airlines, said that his company, which won authorization late last month from the Civil Aeronautics Board to take over most of Braniff's extensive Latin American routes on June 1, was getting ready to begin serving those routes within 24 hours.

Braniff had reached an agreement to lease the money-losing routes, the last of its overseas operations, in its effort to return to profitability. Other Carriers Ready

The vacuum left by Braniff on domestic routes was expected to be filled quickly by other airlines, primarily American and Delta, without the addition of new flight operations. Braniff's routes are concentrated in the Southwest.

Elizabeth E. Bailey, vice chairman of the Civil Aeronautics Board, said the Braniff system ''is one where other carriers can move in rapidly.'' She also said most of Braniff's destinations were served by at least one other carrier, so she did not expect any community to be left without essential air service.

Braniff had its last profitable year in 1978, when it earned $45.2 million on revenues of $972.1 million. That was the year airline deregulation was enacted, and Braniff began its rapid expansion from a carrier serving primarily the Middle West and Latin America. Over a period of months, it added hundreds of new routes in the United States and to Europe and Asia.

Since 1978 its losses have totaled nearly $400 million, including $160.1 million last year on revenues of $1.21 billion and $41.4 million in this year's first quarter. During 1981 Braniff flew 10.5 million passengers.

On the New York Stock Exchange yesterday, Braniff stock closed at $2.125, unchanged. As Braniff continued its efforts to shrink its operations and reverse its severe losses, the Reagan Administration put pressure on the C.A.B. to expedite Braniff's leasing of its South American routes as a means of staving off bankruptcy. Braniff lost $15 million on the Latin routes last year. Problems of Cash Flow

Reports that Braniff's financial troubles were reaching a final crisis began early yesterday and intensified as the airline's executives conferred. Pilots had reported early in the day that the carrier was recalling planes.

Braniff had managed to struggle along since last fall despite severe cash flow problems and one of the worst slumps in the airline industry's history. The major carriers lost more $494 million during this year's first quarter.

Repeatedly Braniff resorted to discount fares to get quick cash, but even the payment of $11 million from Eastern for the Latin American routes did little to ease the cash situation.

And Braniff met stiff competition from American Airlines, which matched Braniff's lower fares and has been competing aggressively on many of the routes served by Braniff.

Howard D. Putnam, the former head of Southwest Airlines who took over as chairman of the Braniff last fall, told stockholders at the annual meeting in April that the airline was still short of cash. In a filing with the Securities and Exchange Commission, the Braniff International Corporation, the holding company for the airline, reported that its net worth had declined to a negative $94.4 million from a positive $66.18 million last Dec. 31.

In past interviews, Mr. Putnam said Braniff was engaged in a lifeand-death race in which it was trying to bring its costs down quickly so that it could make money at the lower fares.

A version of this article appears in print on , Section A, Page 1 of the National edition with the headline: BRANIFF, IN FINANCIAL CRISIS, CANCELS ALL FLIGHTS. Order Reprints | Today’s Paper | Subscribe